Inadequate planning on PLI Schemes

Synopsis: Production-linked incentive (PLI) schemes are gathering momentum. 

Introduction  

25 companies, including Nokia and Dixon Technologies, have registered for the telecom hardware PLI scheme. It is worth over Rs 12,000 crore.  

PLI schemes for telecom hardware, steel sector, advanced chemistry cell batteries etc. Have been notified. However, sufficient thought or a strategic planning is missing in this expansion of PLI schemes.  

What are the issues with PLI Schemes? 

• It is just like an old-style industrial policy. Incentives will be provided to uncompetitive units in order to ramp up production for the domestic market.  
• It will create institutional links between industrialists and the bureaucracy. These links will be very difficult to manage in the long run.  
• Implementing the scheme across multiple sectors is useless. It will not be able to overcome the existing barriers to exports and will put additional burden on taxpayers. 
• These schemes will only be useful for sector, where a foreign and domestic market exists and hurdles like the cost of purchasing intellectual property and other start-up costs exists. lithium-ion batteries sector is one such sector. 

Suggestions  

• “Institutional mechanism” to manage obstacles in PLI scheme implementation.  
• Providing “hand-holding” support for firms. 
• PLI scheme should be a sector or industry specific scheme. For example,  

• if it aims at generating factory jobs, it should be concentrated in labor-intensive sectors.  
• If it aims to reduce strategic independence on China, then it should focus on diversifying specific China-focused supply chains alongside a China-focused trade policy. 

Source: Livemint